What Dimensions of Lead Auditor Expertise Matter for Audit Quality and Audit Fees?

Posted: 7 Mar 2015

See all articles by Jürgen Ernstberger

Jürgen Ernstberger

Technische Universität München

Christopher Koch

Johannes Gutenberg University Mainz - Gutenberg School of Economics and Management

Hun-Tong Tan

Nanyang Business School, Nanyang Technological University

Date Written: March 6, 2015

Abstract

This study investigates the effects of lead auditors’ technical and managerial knowledge on audit quality and audit fees. The German institutional environment enables us to track auditors over their careers and measure their various personal attributes. We find that lead auditors’ technical knowledge is more important for audit quality than their managerial knowledge; however, their managerial knowledge is a more influential driver of audit fees than their technical knowledge. The results of various identification strategies including firm-fixed effects models, propensity-score matching, and instrumental variables approaches suggest that the observed relations are treatment rather than selection effects. The findings enhance our understanding of the role and nature of expertise in auditing and demonstrate the value of lead auditor identification as currently discussed by the PCAOB and the IAASB.

Keywords: technical knowledge; managerial knowledge; audit quality; audit fees

JEL Classification: M42

Suggested Citation

Ernstberger, Jürgen and Koch, Christopher and Tan, Hun-Tong, What Dimensions of Lead Auditor Expertise Matter for Audit Quality and Audit Fees? (March 6, 2015). Available at SSRN: https://ssrn.com/abstract=2574639 or http://dx.doi.org/10.2139/ssrn.2574639

Jürgen Ernstberger

Technische Universität München ( email )

Arcisstraße 21
Munich, 80333
Germany

Christopher Koch (Contact Author)

Johannes Gutenberg University Mainz - Gutenberg School of Economics and Management ( email )

Mainz
Germany
+49 (6131) 3929990 (Phone)

HOME PAGE: http://https://www.cg.bwl.uni-mainz.de/

Hun-Tong Tan

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore
+65 6790 4819 (Phone)
+65 6793 7956 (Fax)

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